News Corp. Board Has ‘Full Confidence’ in Rupert Murdoch

News Corp.'s board expressed “full confidence in Rupert Murdoch’s fitness” to lead the company, the directors said in a statement after meeting yesterday. Photographer: Victor J. Blue/Bloomberg

May 3 (Bloomberg) -- News Corp.’s board pledged its support
for Chairman Rupert Murdoch as a U.S. senator sought evidence
about the phone-hacking scandal that led U.K. lawmakers to say
the media magnate wasn’t suited to run the company.

The board expressed “full confidence in Rupert Murdoch’s
fitness” to lead the company, the directors said in a statement
after meeting yesterday. Hours later, U.S. Senator Jay
Rockefeller, a West Virginia Democrat, released a letter sent to
a U.K. media-ethics inquiry seeking whether there was information
indicating American citizens had their voice mail intercepted.

The U.K. House of Commons Culture Committee in a May 1 vote
said that Murdoch was “not a fit person” to lead a major
international company after News Corp.’s British unit misled
Parliament about the extent of phone hacking at its News of the
World tabloid. Rockefeller’s letter to the media-ethics inquiry
triggered by the scandal said he had been following the U.K.
proceedings with “great interest.”

“The newspapers’ employees and agents not only appear to
have illegally intercepted private telephone communications;
there is also evidence that they improperly made large cash
payments to police officers,” the senator wrote. “I would like
to know whether News International or any other News Corporation
business used hacking, bribing or other similar tactics when
operating in the United States.”

Similar Questions

Rockefeller, chairman of the Senate Committee on Commerce,
Science and Transportation, raised similar questions in July as
news of the scandal spread. Murdoch told the media inquiry last
week that the company has cooperated with civil and criminal
probes, turning over information about possible illegal activity
to London police and the U.S. Department of Justice.

John Toker, a spokesman for the inquiry into press ethics,
said Judge Brian Leveson had received the letter and declined to
comment further.

Murdoch “turned a blind eye and exhibited willful
blindness to what was going on in his companies,” the committee
said in the report that was split along political lines. “This
culture, we consider, permeated from the top throughout the
organization and speaks volumes about the lack of effective
corporate governance at News Corp.”

News Corp.’ board, in response to U.K. lawmakers, said they
backed Murdoch’s “vision and leadership” and his ongoing role
at the company.

Murdoch Friends

The 81-year-old Murdoch also received support from high-profile friends including Donald Trump, Barry Diller and Jacob
Rothschild, an investment banker who helped Murdoch buy the now-defunct News of the World tabloid more than 40 years ago.

“We shouldn’t forget that he made a unique contribution to
media in this country,” said Rothschild, a British baron who
served on the board of News Corp.’s British Sky Broadcasting
Group Plc. satellite-TV business. Murdoch saved the U.K.
newspaper industry and was a pioneer of pay-television in the
country, said Rothschild, the co-founder and chairman of J
Rothschild Capital Management.

The U.K. parliamentary report may increase the likelihood
that media regulator Ofcom concludes News Corp. is unfit to hold
a broadcasting license and asks the company to reduce its 39
percent stake in BSkyB. The phone-hacking scandal prompted News
Corp. to abandon a 7.8 billion-pound ($12.6 billion) bid for the
rest of BSkyB, the U.K.’s biggest pay-television provider, last
year.

Credit Ratings

Moody’s Investors Service Inc. said yesterday that News
Corp.’s ratings wouldn’t be affected by the parliamentary
panel’s report. The company’s “significant cash balance and
strong free cash flow generation mitigates the uncertainty of
additional financial fallout from the phone hacking scandal,”
the credit-rating company said in a statement. News Corp. had
$9.4 billion in cash and equivalents at the end of last year.

“However, we view the asset as a core operation and an
important source of financial flexibility for News Corp.,” the
firm said. “We believe the company will have the ability to
maintain such flexibility whether it is forced to become a
passive investor by giving up its seats on BSkyB’s board or to
sell its investment altogether, in which case it would receive
significant after-tax cash proceeds.”

News Corp. shares climbed less than 1 percent to $19.89
yesterday in New York. The stock is up 11 percent this year.